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  • Time Value of Money Assignment

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    joko
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    The document presents three questions related to time value of money concepts: 1) If Anya invested $24 at a 5% interest rate, the balance after 5 years would be $30.60 and after 50 years it would be $215.36. 2) If a bond paying £1000 in 5 years has a 2.35% interest rate, investors would pay £950 for it. 3) If consol bonds pay Rp2.5 million annually in perpetuity with a 3.3% interest rate, the value of the investment is Rp2.5 million / 0.033 = Rp75.75 million.

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    The document presents three questions related to time value of money concepts: 1) If Anya invested $24 at a 5% interest rate, the balance after 5 years would be $30.60 and after 50 years it would be $215.36. 2) If a bond paying £1000 in 5 years has a 2.35% interest rate, investors would pay £950 for it. 3) If consol bonds pay Rp2.5 million annually in perpetuity with a 3.3% interest rate, the value of the investment is Rp2.5 million / 0.033 = Rp75.75 million.

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    © All Rights Reserved
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    13 views1 page

    Time Value of Money Assignment

    Uploaded by

    joko
    The document presents three questions related to time value of money concepts: 1) If Anya invested $24 at a 5% interest rate, the balance after 5 years would be $30.60 and after 50 years it would be $215.36. 2) If a bond paying £1000 in 5 years has a 2.35% interest rate, investors would pay £950 for it. 3) If consol bonds pay Rp2.5 million annually in perpetuity with a 3.3% interest rate, the value of the investment is Rp2.5 million / 0.033 = Rp75.75 million.

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    © All Rights Reserved
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    Time value of money

    Please see these questions below, answer all of the question by providing your own calculation
    on the problem. Notes: Please do step-by-step approach, draw a timeline, and provide calculation
    clearly.
    a. Suppose that Anya did not become an real estate businessperson but instead had invested her
    $24 at 5% interest rate in Allo Saving Bank. What would have been the balance in her
    account after 5 years? 50 years?
    b. You could instead have bought a Fixed Rate Seri FR0056 that simply promised to pay
    GBP1000 at the end of 5 years. If the 5 year rate was 2.35%, how much would investors have
    been prepared to pay for this strip?
    c. An investment in consol bonds promises to provide an interest payment of Rp2.5 million a
    year in perpetuity. If interest rate is 3.3%, what is the value of this investment?

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